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Charitable foundations start as nonprofit corporations, but not all nonprofit corporations become charitable foundations. Different public service organizations have different financial needs and giving goals, and not all need federal tax-exempt status. Understanding the different nonprofit classifications will help you choose the right status for your organization.

Nonprofit Corporations

Not-for-profit recognition begins at the state level. An organization incorporates with a secretary of state and asks for nonprofit status based on its goals. The application must include articles of incorporation that include a brief description of the organization, including its purpose. Nonprofit corporate status provides benefits, such as exemption from state sales and income taxes, access to state grants and participation in programs that the state offers nonprofits. Depending on the size of the nonprofit and its operating area, the organization might feel no need to seek federal tax-exempt or charitable status.

Charitable Foundation

A charitable foundation collects and disburses funds for the public good. This differs from the nonprofit work of a trade association, for example, which exists to serve and advance the needs a specific group of people. After an organization becomes a nonprofit corporation, it can apply for 501(c) status with the Internal Revenue Service. The IRS awards more than 50 different 501(c) classifications that provide different benefits and have different restrictions. A charitable foundation may collect donations that provide donors with a tax write-off, while a trade association cannot. This is why some 501(c)(6) trade associations create 501(c)(3) foundations.

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About the Author

Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such Smart-Healthy-Living.net, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.

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Ashe-Edmunds, Sam. "Is a Charitable Foundation the Same as a Nonprofit Corporation?" Small Business - Chron.com, http://smallbusiness.chron.com/charitable-foundation-same-nonprofit-corporation-62318.html. Accessed 19 December 2018.

Ashe-Edmunds, Sam. (n.d.). Is a Charitable Foundation the Same as a Nonprofit Corporation? Small Business - Chron.com. Retrieved from http://smallbusiness.chron.com/charitable-foundation-same-nonprofit-corporation-62318.html

Ashe-Edmunds, Sam. "Is a Charitable Foundation the Same as a Nonprofit Corporation?" accessed December 19, 2018. http://smallbusiness.chron.com/charitable-foundation-same-nonprofit-corporation-62318.html

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